International -- Readers Report
Is McKinsey Responsible If Its Clients Fail?
Your interesting article, "Inside McKinsey" (Cover Story, July 8), confirmed my bad opinion about consulting. The best consultants don't work very long as consultants (see Louis Gerstner), and a good company doesn't need consulting, since the core business of a company is, well, business. By the way, any consulting firm should be accountable for the ideas and concepts it provides--and [not to mention] the money when a customer has to file for bankruptcy.
Jean Roger Debonneville
Renes, Switzerland
"Inside McKinsey" doesn't provide any evidence to suggest that McKinsey in any way contributed to the downfall of Enron, Kmart, Swissair, or Global Crossing. We now know that Enron's fall resulted from questionable practices.
We also know that Kmart Corp. continued to stay behind Wal-Mart Stores Inc. in deployment of technology, management of supply chains, strategic alliances with major suppliers, and the product mix preferred by the consumer. Low prices and higher sales should have resulted from cost-effective procurement and operations--not from a price war.
Regarding Swissair, strategy execution remains one of the weakest areas in many corporations. It should become a fertile area for academic research.
Kalyan Singhal
University of Baltimore
Baltimore
McKinsey did exactly what it was hired to do--help client executives formulate business strategies using sound psychology and economics, the foundations of marketing, finance, and all other business disciplines that increase the value of the client's organization. Client management had the fiduciary (key word) responsibility to select those strategies and tools that it believed would increase the company's value, as measured by the stock price in most cases, without jeopardizing its future. No one should blame McKinsey for providing client executives with a diverse set of perspectives and options. Client management is responsible for executing those strategies.
Dennis Knueven
Columbus, Ohio
The consultants I've encountered in my 40-plus years in business (I'm now retired) usually have presented themselves as strategic thinkers. If the strategy fails, it's always due to poor execution, never to a flawed strategy. In my opinion, this is the standard cop-out for consultants, including McKinsey.
Martin Parker
Thousand Oaks, Calif.
As a longtime management consultant, I must take issue with your understanding of the management-consulting process. A company will frequently seek advice and then argue for the opposite conclusion. Or the company will partially implement your suggestions, often because it has sought advice from other professionals who provide conflicting advice.
In addition, you ignore the political dimension. Frequently, the client has the right solution in-house, and the consultant merely resolves the internal conflict--with the added bonus that management doesn't have to take responsibility should things go awry.
Ira Davidson
New York
In your cover story on McKinsey, you pose the question, "What accountability does it--or any consulting firm--have for the ideas and concepts it launches into a company?" If in fact McKinsey should share the blame because of the ideas and concepts it launched into Enron, then why stop there? Perhaps you should also blame the brilliant professors at the business schools from which McKinsey recruits many of its consultants and who may have taught the same concepts to Enron executives.
On the other hand, perhaps blaming teachers for the scandalous actions of their students is a pursuit not worthy of BusinessWeek.
Christopher John Davison
Ponte Vedra Beach, Fla.
Kudos for the Andersen Indictment
The defense of Arthur Andersen in your editorial "A hollow victory against Andersen" (July 1) was premature and off the mark as case after case has come to light that Andersen was wholly ineffectual when auditing the books of so many major corporations (Waste Management, the Baptist Foundation, Enron, WorldCom etc.). This is why they do not deserve to survive as a firm, and the Justice Dept. was right to indict them with the full might of U.S. laws.
The credibility of U.S. business mores and practices is at stake for the rest of the world to regain confidence in the U.S. brand of capitalism. For the moment, and as long as the U.S. does not put its house in order by going after the organizations and the executives and the professionals who enriched themselves at the expense of so many stakeholders, this confidence will remain elusive. And investors will flee the U.S. stock market in the face of this pervasive cheating mentality in U.S. executive suites.
David Harari
Rocquencourt, France
What It Will Take to Ensure Corporate Integrity
"Restoring trust in Corporate America" (Cover Story, June 24) suggests that business must lead the way. That is only feasible when management acts honestly and responsibly. Can better internal audits be the answer? All external auditors hold the view that they cannot detect financial misrepresentations made on purpose by management. It is obviously far easier for an internal audit department to spot mistakes or "cooking the books" than for an outside organization to do so. It is more likely that the audit committee of the board will discover problems when meeting with the internal auditors, without company management present, than when meeting with external auditors. All serious problems are known inside the company long before the board hears about them.
One might object that management will exert the same pressure on internal audit departments as they do on external auditors. Therefore, internal auditing departments should be strengthened. That will cost a fraction of what external auditors charge. Internal audit-department employees must also be given "whistle-blower" security. There would still be a role for auditing firms as financial experts similar to legal firms. The facts show that it is not realistic to expect auditing firms to be able to function as guardians of true and honest financial reporting.
Laurens van den Muyzenberg
Cannes, France
To me, it's all about managing the business instead of managing the stock value. Now that WorldCom's accounting fraud has given us reason to doubt even cash flow and earnings (EBITA) as a measure of a company's performance and the stock market continues to be down, management ought to be ready to get back to basics.
John A. Byrne nails it in "Restoring Trust in Corporate America," but then he takes the view that rebuilding trust is all about reform and regulation. I think it's about CEOs having, or not having, the right mindset.
Instead of promoting the company's stock or cooking the figures, CEOs should start thinking about promoting the company's business. Maybe what's bad for Wall Street is good for business. Maybe what's important now is to start thinking about how to blow away the competition. The market might be down, and trust may be shaken, but I predict that CEOs who go back to business will be on the rise.
Gustav Hafren
Helsinki
Bruce Nussbaum's essay "Can trust be rebuilt?" ("Scandals in Corporate America," American News, July 8) says "Boards of directors are firing CEOs left and right." But these fired CEOs are walking away with golden parachutes paying them more money for being fired than most Americans earn in a lifetime. Such actions continue to destroy, not rebuild, trust.
John Mitchem
San Jose, Calif.
Suez Sets the Record Straight
BusinessWeek did me the honor of ranking me among "The stars of Europe" (European Edition Cover Story, June 17). The article about my actions at the head of Suez, "Creating a gusher in power and energy," is very thorough and brings to mind the different stages of our group. One of the strengths of our group is that while we are still young, we have roots that go back more than 100 years.
I was appointed chairman and CEO of Compagnie de Suez in 1995, which at that time was confronted with great difficulties due to the real estate crisis and banking crisis. I decided to sell off our bank and real estate assets and to take over Tractebel. In 1997, Jerome Monod and I decided to merge our two groups to create a global leader in water, energy, and waste services. This merger was a great success thanks to our common desire.
Therefore, the term "troubled water utility Lyonnaise des Eaux" does not in any way correspond to the true situation of Lyonnaise in 1997, which was in fact good. The adjective "troubled" is more suited to the situation of Compagnie de Suez in 1995 after all the hard times it had been through. I would be grateful if you could let your readers know about the true situation of Lyonnaise des Eaux at the time of the merger.
Gérard Mestrallet
Chairman and CEO
Suez
Paris
At the WTO, Taiwan's Is an Independent Voice
Peter T. Milne's response to Jeffrey E. Garten's article "When everything is made in China" ("Deconstructing China's WTO participation," Readers Report, July 8) fails to account for the fact that Taiwan is not part of mainland China. Indeed, many other nations recognize our nation's sovereignty. Even those who argue that Taiwan should not be recognized as an independent state do not deny the fact that Taiwan's economy, society, and political system are effectively separate and distinct from the mainland's.
Therefore, it is a mischaracterization to count Taiwan among China's "three votes" in the World Trade Organization. Indeed, Taiwan's representatives are there to advocate only the interests of Taiwan. They have and will exercise the right to vote differently from China's representatives in WTO decisions.
Jung-tzung Yih
Director, Information Div.
Taipei Economic & Cultural Office
New York
OPEC May End Up with the Last Laugh
Stanley Reed cautions that the Middle East's oil-producing and exporting countries (OPEC) might be thinking too short term in "Does OPEC have sand in its eyes?" (Finance, July 1). But let's toy with the idea that it's thinking much longer term than that. Right now, OPEC pulls in big bucks for its oil while losing market share to Russian, South American, and Caspian players. As Reed points out, "It's not what you have in the ground that matters, it's what you pump and sell."
However, some 40 or 50 years from now, when the Russians' oil fields are depleted and OPEC's members still have oil in the ground, what will the picture be? Let's see: OPEC gets good money for their oil to stuff their coffers now, and when the other players have jockeyed their way into depleting their resources prematurely, OPEC emerges as the financial and political king of the hill. Perhaps they're not such short-sighted fools after all.
Matt Danielsson
Weed, Calif.
For Better or Worse, Nokia Goes Its Own Way
Reengineer when you are at the top and you will never see the bottom. And Nokia surely seems to be doing much more ("Nokia's Next Act," Cover Story, European edition, July 1). Apart from adhering to the basics, such as conformance to standards and innovating before the market starts digesting, Nokia has always been proactive in its approach.
Whether it succeeds or not, one thing is certain: Competitors won't be the reason for its downfall. Even that credit Nokia won't allow them.
Manish Mamtani
Indore, India
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Copyright 2002, by The McGraw-Hill Companies Inc. All rights reserved.
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